Edge computing presents a new opportunity for telecom service providers to have a cloud play. Their proximity to users gives them an inherent advantage at the ‘edge.’ The question is: are the telcos ready to capitalize on this opportunity? What could be their approach in securing their share of this market? And, will they succeed in claiming their share of this emerging market?
The rise of the edge computing
Ever since the early age of computers, there’s a constant battle between centralized architectures represented by mainframe computers and servers and the edge represented by personal computers and mobile devices. The mobile cloud has proved extremely successful in meeting today’s applications’ requirements. But the explosion in number of devices driven by IoT and other applications is putting pressure to distribute cloud services towards the edge. New applications with stringent performance requirements necessitate processing closer to the user and device. This made edge computing one of the hottest topics of discussions in industry circles.
The MNO advantage
Telecom service providers including mobile network operators own many assets that position them well for an edge play, including tens of thousands of cell sites and hundreds if not thousands of central offices among other assets. With a good part of the edge being about location, telecom service providers have an inherent advantage over the Cloud players. The question is whether they can capitalize on this advantage by monetizing new services that are highly in demand. This is a difficult question to answer because as of yet the killer application for edge computing is uncertain as is the ability of the telecom service providers to execute.
Challenges facing MNOs
There are a number of challenges that face telecom service providers. Perhaps the foremost challenge is that edge computing is a cloud play. In fact, the term ‘edge cloud’ would more appropriate than ‘edge computing’. Telecom service providers lack the cloud DNA. They have struggled in the past to maintain a healthy data center business, at least in North America. The following are some of the data center divestments over the past three years:
- Brookfield Infrastructure Partners acquires 31 data centers from AT&T for $1.1 billion (2018).
- Peak 10 acquired ViaWest (30 data centers) from Shaw Communications for $1.67 billion (2017).
- CenturyLink sold its 57 data center business to a group of investors (BC Partners, Medina Capital Advisors and Longview Asset Management) for $2.3 billion. The new operation is now called Cyxtera (2017).
- Equinix acquired Verizon data center portfolio (24 data centers in the US and Latin America) for $3.6 billion (2016).
Could the rise of edge computing be a way for the telcos to get back into the data center game? Could the inherent performance advantage in being close to users drive new revenue and services? These are some of the questions that we have been thinking about.
The competitive landscape
The ability of the telecom service providers to monetize the edge will invariably get them in contact with the cloud players, either on competitive of cooperative grounds. Cloud players – e.g. AWS, Microsoft and Google – have been moving closer to the edge focusing on IoT and Artificial Intelligence applications. In recent months, there were a flurry of news from these and other players on different types of services (e.g. Google Cloud IoT Edge) and business partnerships (e.g. Microsoft and Equinix on hybrid cloud). In this, they have a head start over the telcos. But the race is still in its early stages and it is a long one!
Aside from the cloud players, the edge is receiving interest from different investor groups, including tower companies and neutral hosts. New ventures with a focus on edge data centers are beginning to pop up in different locations. In this, the telcos are not alone in this race.
The future outlook
Telcos are in the midst of a major network transformation towards virtualization that started only a few years ago. This transformation primarily impact the architecture of the core network and allows operators new approaches to offer edge cloud services. The transformation will serve as the basis for further evolution brought about by the 5G architecture. While we are still a few years away from deploying a 5G core, there’s little technical challenge to keep service providers from developing edge services.
Today, a class of service providers are active in developing competency in software and are leading in network transformation towards virtualization. These service providers – such as Verizon, AT&T, Deutsche Telekom, Docomo, SK Telecom and few others – will be in a better position to leverage the opportunity presented by edge computing. But their ability to succeed in edge service will depend on a number of factors including their market context.